Markets regain a positive risk sentiment ahead of the NFP - Market Overview

Markets regain a positive risk sentiment ahead of the NFP -  Market Overview

Waiting for the Non-farm Payroll figure this afternoon, the markets return to more optimistic risk sentiment.

Previously published employment reports suggested positive NFP numbers, with the average forecast in favor of a 978k figure. Jobless Claims dropped 498k, lower than expected, while the ADP figure was also positive.

Meanwhile, central banks are more and more in favor of reducing their asset purchase programs. Yesterday, the Bank of England announced its intention to withdraw stimulus, as the economy is in full recovery mode, with the latest data being increasingly positive. The same is happening in Europe as well, with ECB members announcing that the reduction in asset purchases could begin as soon as the month. And although Fed officials were not very explicit in this regard, the general market consensus is that they will join this trend sooner rather than later.

How did the EUR/USD pair react?

This has caused the EUR /USD to surge to 1.2090 from 1.2050. Should the pair close above this level, it could signal an upward move that would find its main resistance around 1.2180.

In the short term, the movement will depend on the NFP report published today. A strong data could lead to upward momentum for the dollar, at least in the short term, slowing the rise of the EUR/USD pair. If the figure fails to match expectations, the market could continue with dollar sales to support the pair in its current short-term trend.

The Gold market.

Under these circumstances, GOLD could be impacted as well. The recent rise that has overcome critical resistance levels pointing to further gains is reinforced by the current real interest rates below -2% in the United States. An initiation of the tapering process would lower investors' interest in the precious metal, as it benefits from low real interest rates by acting as an investment and hedging alternative.

For now, gold has exceeded the previous high of 1815, pointing towards targets located between the 1850 and 1860 area.

Sources: investing.com, reuters.com.

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